The lawsuit is reportedly regarding 30 triple-A rated CDOs from the first half of 2007, and the Department of Justice is seeking "a 10 figure plus settlement and the admission of wrongdoing," according to sources.
"A DOJ lawsuit would be entirely without factual or legal merit," S&P said in a statement. "It would disregard the central facts that S&P reviewed the same subprime mortgage data as the rest of the market – including U.S. government officials who in 2007 publicly stated that problems in the subprime market appeared to be contained – and that every CDO that DOJ has cited to us also independently received the same rating from another rating agency."
Shares of McGraw-Hill plunged nearly 14 percent on Monday, its second biggest one-day drop ever. The worst session for the stock was Black Monday on October 19, 1987 when it tumbled 19 percent.
A person familiar with the situation said New York State Attorney General Eric Schneiderman is not part of the suit against S&P. His office declined to comment. Schneiderman has been conducting his own investigation into mortgage related issues.